press release

Unocal posts 2Q 2001 operating earnings of 92 cents per share on higher natgas prices and production in the Lower 48

El Segundo, Calif., July 25, 2001 -- Unocal Corporation (NYSE: UCL) today reported that adjusted aftertax earnings from continuing operations (excluding special items) in the second quarter were $228 million or 92 cents per share (diluted). This compares with the latest Thompson/First Call estimates of 73 to 85 cents per share (80 cents per share consensus).

In the second quarter 2000, Unocal had adjusted aftertax earnings from continuing operations of $170 million, or 69 cents per share (diluted).

Including special items and discontinued operations, Unocal's net earnings for the second quarter were $247 million, or 99 cents per share (diluted). This compares with net earnings in the same period a year ago of $264 million, or $1.05 per share (diluted).

"The higher operating earnings were driven principally by higher natural gas prices in the Lower 48 U.S., compared with 2Q 2000, and continued increases in our worldwide natural gas and liquids production," said Charles R. Williamson, Unocal chief executive officer. "In the Lower 48, we posted the sixth straight quarter of higher natural gas production."


     CONSOLIDATED RESULTS (UNAUDITED)               2Q        1Q        2Q
     Millions of dollars except
      per share amounts                            2001      2001      2000
     Adjusted after-tax earnings
      from continuing operations                   $228      $340      $170
     Special items                                    7       (48)       80
     Earnings from continuing operations           $235      $292      $250
     Earnings from discontinued operations           12         4        14
     Cumulative effect of accounting change          --        (1)       --
       Net earnings                                $247      $295      $264

     DILUTED EARNINGS PER SHARE DATA (UNAUDITED)
     Adjusted after-tax earnings
      per share from continuing operations        $0.92     $1.35     $0.69
     Net earnings per share:
       Continuing operations                      $0.95     $1.16     $1.00
       Discontinued operations                     0.04      0.02      0.05
     Total net earnings per share                 $0.99     $1.18     $1.05

     CASH FLOW DATA (UNAUDITED)
     Adjusted discretionary cash flow              $614      $714      $495
     Adjusted discretionary cash flow per share
      (diluted)                                   $2.39     $2.79     $1.93

     REVENUES FROM CONTINUING OPERATIONS
      (UNAUDITED)                                $1,696    $2,214    $2,216

Production and prices

Unocal's net natural gas production in the Lower 48 U.S. averaged 954 million cubic feet per day (mmcfd), up 31 percent from the same period a year ago. The higher production reflected output from the Muni field (which began production in the fall 2000), as well as newly acquired properties in Mobile Bay and other GOM shelf areas and increased production by Unocal's 65-percent-owned Pure Resources, Inc. (NYSE: PRS) subsidiary.

Unocal's Lower 48 average price for natural gas was $4.62 per thousand cubic feet (mcf), up from $3.41 per mcf the same period a year ago. Average price for liquids (crude oil, condensate and natural gas liquids) was $24.57 per barrel, off from $25.14.

Worldwide, Unocal's consolidated net daily production in the second quarter 2001 averaged 516,000 barrels-of-oil equivalent (BOE) per day, up nearly 11 percent from a year ago. Average worldwide price for natural gas was $3.41 per mcf, up from $2.64 per mcf a year ago. Worldwide average liquids price was $24.33 per barrel, down from $24.53 in the second quarter 2000.

Financial measures

Unocal's adjusted discretionary cash flow for the second quarter was $614 million, or $2.39 per share (diluted). This compares with $495 million, or $1.93 per share (diluted), a year ago.

Capital spending for the quarter was $464 million, compared with $263 in the second quarter 2000. The capital spending in both periods excludes major acquisition costs.

The company's long-term debt (including current maturities) was $2.96 billion (45% debt-to-total capitalization ratio) at the end of the second quarter, compared with $2.51 billion (44% debt-to-total capitalization ratio) at year-end 2000.

Total second quarter revenues from continuing operations were $1.70 billion, compared with $2.22 billion in the second quarter 2000. The 2001 revenues primarily reflect reduced crude oil trading activity by the company's Global Trade segment. Revenues from exploration and production operations were $1.05 billion, up from $838 million in the second quarter 2000.

Special items

Significant aftertax special items in the second quarter 2001 included a net $21 million gain for mark-to-market accruals and realized gains/losses by Unocal's Northrock Resources Ltd. subsidiary related to commodity derivative positions not accounted for as hedges. The company also recorded environmental and litigation provisions of $14 million and a $12 million gain related to certain gasoline margins subject to a participation agreement tied to Unocal's former West Coast refining, marketing and transportation assets.

Six months results

For the first six months of 2001, Unocal's adjusted aftertax earnings from continuing operations were $568 million, or $2.26 per share (diluted). Including special items, discontinued operations and the cumulative effect of an accounting change, Unocal's net earnings for the first six months were $542 million, or $2.17 per share (diluted).

Total revenues from continuing operations for the six months were $3.91 billion, compared with $4.07 billion in 2000. Revenues from exploration and production operations were $2.19 billion, up from $1.53 billion in the first half of 2000.

    

     CONSOLIDATED RESULTS (UNAUDITED)                      For the Six Months
                                                             Ended June 30,
     Millions of dollars except per share amounts            2001      2000
     Adjusted after-tax earnings
      from continuing operations                             $568      $309
     Special items                                            (41)       65
     Earnings from continuing operations                     $527      $374
     Earnings from discontinued operations                     16        23
     Cumulative effect of accounting change                    (1)       --
       Net earnings                                          $542      $397

     DILUTED EARNINGS PER SHARE DATA (UNAUDITED)
     Adjusted after-tax earnings per share from continuing
      operations                                            $2.26     $1.26
     Net earnings per share:
       Continuing operations                                $2.11     $1.51
       Discontinued operations                               0.06      0.09
     Total net earnings per share                           $2.17     $1.60

     CASH FLOW DATA (UNAUDITED)
     Adjusted discretionary cash flow                      $1,328      $907
     Adjusted discretionary cash flow
      per share (diluted)                                   $5.17     $3.54

     REVENUES FROM CONTINUING OPERATIONS (UNAUDITED)       $3,910    $4,072

Earnings/production forecast

"For the third quarter, we are forecasting adjusted earnings from continuing operations of 50 to 60 cents per share, reflecting lower U.S. commodity prices," Williamson said.

The third quarter earnings forecast assumes average NYMEX benchmark prices of $25.70 per barrel of crude oil and $3.00 per million British thermal units (mmBtus) for Lower 48 natural gas.

For the full-year 2001, Unocal currently estimates adjusted earnings from continuing operations of $3.20 and $3.40 per share. The full-year earnings forecast assumes average NYMEX benchmark prices of $27.00 per barrel for crude oil and $4.50 per mmBtus for Lower 48 natural gas.

Unocal's third-quarter forecasted earnings are expected to change 3 cents per share for every $1 change in its average worldwide realized price for crude oil and 2 cents per share for every 10-cent change in the company's average realized Lower 48 natural gas price. Full-year adjusted earnings are expected to change 14 cents per share for every $1 change in its average worldwide realized price for crude oil and 7 cents per share for every 10-cent change in the company's average realized Lower 48 natural gas price.

The company expects that net daily worldwide production for the third quarter 2001 will average between 515,000 and 525,000 BOE. For full-year 2001, Unocal is forecasting net worldwide daily production of about 505,000 to 515,000 BOE. In the Lower 48, dry natural gas production is expected to average 920 mmcfd for the year, up from 764 mmcfd in 2000.

The forecast also assumes dry hole costs in the third quarter of $20 to $30 million. For the full-year 2001, the company expects dry hole costs of $175 to $200 million.

About Unocal Corporation

Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal exploration and production operations are located in North America (Gulf of Mexico region, Alaska and Canada) and in Asia (Thailand, Indonesia, Myanmar and Bangladesh). The company is also pursuing exploration programs in West Africa and Brazil.

Conference call/financial database

Unocal will broadcast its quarterly earnings conference call today at 1 p.m. PDT (4 p.m. EDT) over the Internet. To listen to the live webcast, go to the Investor Information section of the Unocal web site. Replays of the conference call, including questions and answers, will be available until Aug. 31, 2001.

In addition, complete detailed financial tables for the 2Q 2001 and the comparable prior periods are available in the "Quarterly Fact Book," which has been posted in the Unocal Investor Data Warehouse.

This news release contains certain forward-looking statements about commodity prices, production and earnings. These statements are not guarantees of future performance. The statements are based upon Unocal's current expectations and beliefs and are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward looking statements. Actual results could differ materially as a result of factors discussed in Unocal's 2000 Form 10-K and other reports filed with the U.S. Securities and Exchange Commission. Unocal undertakes no obligation to update the information in this news release.

Production amounts include minority interest and equity investee shares in the U.S. Investors are urged to consider closely the disclosure in Unocal's 2000 Form 10-K and other reports. Copies of the company's SEC filings are available from the company by calling 800-252-2233. The reports are also available on the Unocal web site.


    ADJUSTED AFTER-TAX EARNINGS
    BY BUSINESS SEGMENT                             2nd       1st      2nd
    (UNAUDITED)                                    Quarter   Quarter Quarter
    Millions of dollars                             2001      2001     2000

    Exploration & Production
    North America
    Lower 48 (a) (b)                             142       241       92
    Alaska                                        13        19       23
    Canada (a)                                    (7)       14      (11)
    International
    Far East                                     113       106       88
    Other                                          5        22       19
    Global Trade                                       4         3        6
    Midstream                                         18         9       15
    Geothermal and Power Operations                    2         1        5
    Corporate and Other
    Administrative & General                     (21)      (23)     (21)
    Interest Expense - Net (a)                   (32)      (33)     (37)
    Environmental & Litigation                    (2)       (3)      (3)
    Other                                         (7)      (16)      (6)
    Adjusted after-tax earnings                     $228      $340     $170
    (a) Includes minority interests of:
    Lower 48                                     (15)      (17)      (6)
    Canada                                        --        --       12
    Corporate and Other                            1         1       --
    (b) Includes earnings (loss) from:
    Onshore / Shelf                              150       264      105
    Deepwater                                     (8)      (23)     (13)


    ADJUSTED DISCRETIONARY CASH FLOW                 2nd       1st      2nd
    (UNAUDITED)                                    Quarter   Quarter Quarter
    Millions except per share amounts               2001      2001     2000
    Adjusted after-tax earnings                     $228      $340     $170
    Adjustments to earnings, excluding special
    items:
    Depreciation, depletion and amortization       268       245      224
    Dry hole costs                                  47        40       37
    Deferred income taxes                           45        60       30
    Exploration expenses                            32        34       37
    Capitalized interest                            (6)       (5)      (3)
    Total adjusted discretionary cash flow      $614      $714     $495

    Diluted weighted average shares                  257       256      256
    Adjusted discretionary cash flow per share
    (diluted)                                      2.39      2.79     1.93
    
  

The preceding table of discretionary cash flow, excluding special items and all asset sales, is provided for analysts and others in the investment community as a supplement to conventional financial data prepared in accordance with generally accepted accounting principles. Discretionary cash flow assumes certain income taxes related to special items are deferred and does not give effect to significant uses of cash, including those for capital projects, debt reduction and regular dividends, some of which result from previous commitments, and should only be considered in conjunction with the full presentation of condensed consolidated cash flows in the company's quarterly fact book.


    OPERATING HIGHLIGHTS                              2Q        1Q        2Q
    (UNAUDITED)                                      2001      2001      2000
    North America Net Daily Production
      Crude oil, condensate and
      natural gas liquids
       (thousand barrels)
        Lower 48 (a)                                   59        53        52
        Alaska                                         24        24        27
        Canada (a)                                     15        15        17
        Total crude oil, condensate
         and natural gas liquids                       98        92        96
      Natural gas - dry basis (million cubic feet)
        Lower 48 (a)                                  954       874       726
        Alaska                                         93       138       135
        Canada (a)                                     85       140        92
          Total natural gas                         1,132     1,152       953
    North America Average Prices (b)
      Crude oil, condensate and natural
       gas liquids (per barrel)
        Lower 48                                   $24.57    $26.71    $25.14
        Alaska                                     $22.27    $22.76    $23.79
        Canada                                     $20.84    $20.46    $21.48
          Average                                  $23.45    $24.60    $24.12
      Natural gas (per mcf)
        Lower 48                                    $4.62     $6.93     $3.41
        Alaska                                      $1.20     $1.20     $1.20
        Canada                                      $2.48     $4.22     $1.73
          Average                                   $4.16     $5.87     $2.91
    International Net Daily Production
      Crude oil, condensate and natural
       gas liquids (thousand barrels)
        Far East                                       48        50        47
        Other                                          19        19        18
          Total crude oil, condensate
           and natural gas liquids                     67        69        65
      Natural gas - dry basis (million cubic feet)
        Far East                                      908       793       817
        Other                                          69        57        57
          Total natural gas                           977       850       874
    International Average Prices (b)
      Crude oil, condensate and
       natural gas liquids (per barrel)
        Far East                                   $24.91    $24.25    $24.40
        Other                                      $27.51    $25.55    $26.38
          Average                                  $25.61    $24.67    $25.07
      Natural gas (per mcf)
        Far East                                    $2.54     $2.48     $2.31
        Other                                       $2.92     $2.89     $2.80
          Average                                   $2.56     $2.50     $2.35
    Worldwide Net Daily Production (a)
      Crude oil, condensate and
       natural gas liquids (thousand barrels)         165       161       161
      Natural gas - dry basis
       (million cubic feet)                         2,109     2,002     1,827
      Barrels oil equivalent (thousands)              516       495       466
    Worldwide Average Prices (b)
      Crude oil, condensate and
       natural gas liquids (per barrel)            $24.33    $24.63    $24.53
      Natural gas (per mcf)                         $3.41     $4.41     $2.64

    (a) Production includes 100 percent of production of consolidated
        subsidiaries and proportional shares of production of equity
        investees.
    (b) Average prices include hedging gains and losses but exclude gains or
        losses on derivative 
		

Updated: July 2001